Signaling pathways activated by extracellular growth and differentiation factors such as bone morphogenetic proteins (BMPs) regulate multiple processes in the development of the skeleton, such as skeletal patterning, chondrogenesis, cartilage development and endochondral ossification. On a cellular level, these signaling pathways regulate cell cycle progression, apoptosis, migration, adhesion and changes in gene expression associated with differentiation. We study signaling and gene regulation in the BMP pathways in order to build a knowledge base of the molecular regulation of skeletal development conducive to the advent of novel strategies such as gene therapy and tissue engineering for the treatment of diseases and disorders that affect the skeletal system. Defects in the growth and development of the endochondral bones that comprise the cranial base contribute to several craniofacial dysmorphic syndromes. Since BMP signaling regulates chondrocyte differentiation and endochondral ossification in developing long bones, we have tested the hypothesis that BMP signaling also participates in regulating development of the cranial base. During in vivo developmental progression of the cranial base in mice, a burst of skeletal growth and chondrocyte maturation was identified in the perinatal period. Using a novel serumfree organ culture system, cranial base structures were cultured as explants in the presence of BMP4 or noggin, and analyzed for morphological and molecular changes. Growth of perinatal cranial base explants was inhibited by treatment with noggin, a BMP inhibitor. Exogenous BMP4 promoted cartilage growth, matrix deposition and chondrocyte proliferation in a dose dependent manner. Correspondingly, expression level of the cartilage markers Sox9 and collagen type II were also increased. Alkaline phosphatase and collagen type X expression were up-regulated and expressed in ectopic hypertrophic chondrocytes after treatment of the cultures with BMP4 for seven days. This increase in chondrocyte hypertrophy was accompanied by increased Ihh and PTH/PTHrP receptor (PPR) expression but not increased PTHrP expression. We conclude that endogenous BMPs are required to maintain cartilage growth and exogenous BMP4 can enhance cartilage maturation and induce ectopic chondrocyte hypertrophy in the cranial base. Therefore, appropriate levels of BMP signaling are important for normal cranial base development. At the molecular level, BMP ligands can elicit signal transduction from heterodimeric combinations of several type-I and type-II receptors, followed by three known BMP-specific regulatory Smad proteins: Smad1, 5, and 8. In order to determine the combination of signals that regulate chondrogenesis by BMPs, we analyzed the functions of BMP Smad subtypes in multipotential mesenchymal C3H10T1/2 cells and monopotential chondroprogenitor MC615 cells. In the absence of BMP4, mesenchymal cells did not exhibit chondrogenic differentiation, whereas chondroprogenitor cells showed increased cartilage marker expression. In the presence of BMP4, the rate and extent of chondrogenesis increased in a dose-dependent manner for both cell types. We further determined that Smad1 or Smad5, but not Smad8, synergized with Smad4 in the transactivation of the type-II collagen promoter in chondroprogenitor cells. In contrast, Smad8 and Smad4 presented modest synergy in mesenchymal cells. Taken together, our data suggest that uncommitted mesenchymal cells have limited cellular competence to respond to BMP. However, in chondroprogenitor cells, BMP readily stimulates differentiation through mechanisms mediated by Smad1 or Smad5 in combination with Smad4.